UPDATE: 7-day repo is now up 220bps at 980bps - as the "liquidity crisis" is worse than any other seasonal effect on record...

and to think the media was proclaiming the crisis over just an hour ago as the rate (in green) was sent around the world...

How do you "fix" a nations' banking system's increasingly desperate need (and dependence upon) for government-provided liquidity without giving in and just providing all the inflation-stoking liquidity the banks demand? Simple - in China - you ban the media from discussing it. As The FT reports, Chinese propaganda officials have ordered financial journalists and some media outlets to tone down their coverage of a liquidity crunch in the interbank market, in a sign of how worried Beijing is that the turmoil will continue. The censors have warned reporters not to "hype" the multiple-sigma spikes in overnight-funding rates and have forbidden the press from using the Chinese words for "cash crunch."

Of course - early prints in today's repo market are seeing levels normalize back to around 4-5% (just as Goldman Sachs 'suggested' they would because this liquidity spike is nothing but 'seasonals' - hhhmm)

Via The FT,

Chinese propaganda officials have ordered financial journalists and some media outlets to tone down their coverage of a liquidity crunch in the interbank market, in a sign of how worried Beijing is that the turmoil will continue when markets reopen on Monday.

Short-term interest rates for loans in the interbank market shot up last week in an apparent repeat of the cash crunch in June

...

Money market rates surged again on Friday, even after China’s central bank announced on Thursday evening that it had carried out “short-term liquidity operations” to alleviate the problem.

...

In response Chinese censors have warned financial reporters not to “hype” the story of problems in the interbank market, and in some cases have forbidden them from using the Chinese words for “cash crunch” in their stories, according to two people with direct knowledge of the matter who asked not to be named.

The Communist party’s powerful propaganda department and various other party and government bureaux frequently issue bans and detailed instructions to Chinese media on “sensitive” issues that could undermine party legitimacy.

...

That directive also ordered media to “strengthen their positive reporting” and “fully report the positive aspect of our current economic situation, bolstering the market’s confidence”, according to a copy obtained by the FT.

One can smell the aroma of the spoiling Chinese interbank system from Camden, and that's saying something given the background odor in Camden.

I highly doubt that even the PBoC has even the slightest idea as to how deep the red ink on provincial bank balance sheets runs since those in charge of those banks were praying on bended knee to Mao that they'd be able to show improvement in the quality of their loan portfolios by now, yet look at what's happening/being reported regarding Shanghai new home prices just tonight (down 14.3% IN ONE WEEK).

China and Japan are two of the most toxic economic & financial shitstorms (for different reasons) that the media (global, not just Chinese & Japanese) has intentionally downplayed by an astounding amount, that both represent an imminent & systemic risk to the global economy.

I was telling someone today, can you imagine if someone told you a story about Mexican police officers, hiding on the side of the street, on the last few days of the month, trying to entrap people, and make them pay a bribe/extortion payment. People would be livid. Yet the same thing happens here in North America. We just call it a 'ticket' or a 'fine', instead of a bribe, and on life goes.

"our systemic risk. your problem." we still have too big to fail. we'll see I this amounts to anything more than a blip just like the last time. the only reason the propaganda gets spewed is for "forward" (meaning buyer) "guidance." seasonal factors are meant as a cover for those who have already shorted this thing and are looking to pick up deals on the cheap.

Does it really matter to them? If China goes belly up, what happens in Japan, America, and Europe? One wild-outta-da-blue guess is that they all sink. When all the major economies implode the world economy implodes. It'll be a massive global reset. Then what? Who has the resources like gold or oil?

Perhaps the only thing keeping us in the game at this point is shale oil (or the perception it has generated). If that goes poof then they are free to pull the trigger or does anyone think they genuinely care about our well being?

That directive also ordered media to “strengthen their positive reporting” and “fully report the positive aspect of our current economic situation, bolstering the market’s confidence”, according to a copy obtained by the FT.

You three are something to be sure. I know that you like to have some fun so let's have some fun. It really pissed me off though that Tyler Cato Institute post. Umm, I mean, Captain of the steins and bergs. Nevermind. I do have ask if you have seen daddy joobux on any other boards lately? Ain't that going to be a son of a bitch to explain?

I bet this kind of thing really rubs Obama raw when he thinks HE is the most powerful man in the world but he can't yet make these kinds of proclamations. I'm sure he's working on it. Probably has some new presidential signing order in the works.

There is no need for anyone to panic, unless of course they tell us not to panic. In that case we should always panic but do so while doing our best to not look like we are in a panic. Slowly at first, head for the exits only breaking into a full run when there is no other choice. For all the bullish talk out there I believe they all have one eye on the exit at all times..

Technically Chinese government paper is more attractive than Fed paper. Gold backed and by definition no cash crunch. What is the yield on that paper? Are Chinese millionaires going to dump their overseas real estate holdings to pile into their own government's paper? No, of course not. The paper from China is the biggest fraud in our current financial system. The Chinese Central Bank has no idea just how much of the Mao paper is out there and how much of it is legit. Maybe they don't actually want to know or they're partial to the fraud. I keep repeating myself. The Chinese are defrauding the Yids and that is causing massive headaches from NY to London to Tel Aviv. On top of it, the Chinese are converting their paper to gold which will appease the Arabs and other oil and gas suppliers. Quite the feat and we're unfortunately on the losing end because all our eggs are in the Yid's basket.

Update: May have found part of the reason for today's spike: The results of an audit were released today that found that local government debt has been found to have increased to CNY 19.94 trillion from CNY 10.7 trillion in 2010, effectively doubling in two years. If the audit is conducted every two years and released at about this time of year, then it's par for the course, even it was a double bogey in result. Federal and financial debt are so low though that this is probably just a rebalancing of risk by the financial industry, although you can't just completely overlook the lack of central control and the implications of CNY 5 trillion a year unevenly distributed among the local provinces. Somebody's gonna fry, like Bo Xilia -unless he was the cause of it!

China will start to repatriate funds, cancel investment and generally bring their funds home. Possible shutting up boarders and military key trade routes ala Bird Flu crisis. Watch the Yuan high fixes, also watch gold and gold buys out of China. At the time keep an eye on the 10s and 30s (USTs). The cronies will get the Santa Rally as long as the NY FED provides liquidity right up till 2014 (note that their POMO increased not decreased after Taper). Then after that...The Fed underwriting stocks could be history

China cannot simply start an agressive war against Japan. The country is not self-sfficient in energy and food. And while Japan is not liked, neighboring countries, including Russia, will side with Japan if China attacks Japan. Then, China cannot import energy and food from anywhere beause its access to the ocean is quite limited despite its massive land size.

You're talking about the one that is supposed to hit Puerto Rico, and trigger a Tsunami to wash over Florida, and New York and take out the internet for a year when the main internet servers in New York get knocked out?

There is a good summary of what awaits Eurozone and its current banking problems as portrayed in this article :

Bottom line / Merkel is right. Its her way or the highway. And her way in MORE POLITICAL integration to discipline Europe and save the Union. She and her crowd want EUrope's nation states to accept new PAx Germania, BUT via the EU mechanisms that ensure national agreement and consultation; not by DICTAT !

And in many ways she is SPOT ON ! Germany has the best position to negoiate LT as lead economy with that RM Powerhouse Russia, as the Khodo prison release deal proved and Gazprom now feels the heat of German muscle.

And, Germany has the best industrial model in the world with a DECENTRALISED ENERGY GRID ! As the ZH post on renewable energy points to.

Welcome to the partnership, NOT! And the germans don't have any muscle, they are a people who enjoy collapsing upon themselves only to try it again. They have been proved to be in deep denial on many issues and in collusion with other like minded country's as to their intentions. They are the skelton in the closet.

For once this Tory Elitist hoi-poloi Vanity Fair type journal, not BI but The Economist, now descends from its "holier than thou and white man's superior technology/culture perched pinnacle" to give us a sober historical appraisal of our dystopian world; remembering the lessons of the past when Pax Britannica fell; as could now happen to PAx Americana world.

Tory UK no longer has all the solutions to the world that Maggy"s farm concocted in Saint Francis inspired certitude...Cameron blues, the ongoing crisis and the NSA scam, all based in UK/City land, have now chastened the rampant elitist hubris of this journal.

Sobering, alarmist trends ...something a heretic like me could have written when drunk on bubbly !

Submitted for your approval: The bankers put the price of a global asset class used as savings and collateral for 3/4 of the world down 40%. What would we expect to happen? They really need to stop tinkering.